KTM Monorail Project Cost to Increase by Rs. 36 Billion than Earlier Speculated

The cost of the construction of the 28.55 km Kathmandu Monorail has increased due to lack of coordination between Investment Board Nepal (IBN) and Kathmandu Monorail Company Pvt Ltd (KMCPL).

Back in May, the KMCPL had submitted a detailed feasibility study report to the IBM, which stated that the estimated cost of completing the project was Rs 80 billion. KMC had again assigned the China Railway Construction Corporation (CRCC) to conduct another feasibility study. According to the later study, the estimated cost of the project was Rs. 116 billion.

Nabin Pokharel, Nepal representative of CRCC 25th Bureau informed that they had included the cost of land acquisition for the project in the report which had increased the cost of the project. He added that if they were selected they would be following the internationally practiced model for the construction of the rail and the actual cost could only be finalized after a detailed project report had been finalized. As is the general practice in building large projects, CRCC plans to manage the funds needed for the project through buyer’s credit facility, he informed. CRCC plans to follow the engineering, procurement, construction and financing (EPCF) model for the construction.

On the other hand, KMCPL had proposed to build the project under the build, own operate transfer (BOOT) model. Chairman of KMCPL, DN Thapa, claimed that they were ready to build the project but the government had ignored their detailed feasibility report because they were commission oriented. He stated his opinion that the government was not that serious about the construction of the Kathmandu Monorail project. He added that event though KMCPL had a lower price estimate for the project, the government was still giving higher priority to CRCC for the construction of the project.

KMCPL has also filed a case against IBN at the Supreme Court seeking a review of certain provisions in the MoU. The MoU was amended later by IBN and a provision added was that a company had to deposit performance guarantee of Rs 100 million to conduct detailed project report and KMCPL objected to that clause.

IBN claimed that they had not been informed regarding the progress of the project. The CEO of IBN, Maha Prasad Adhikari, said that they had yet to receive any written document regarding the pact and detailed feasibility report between the KMC and CRCC. He also added that since there exists a law that any project that costs R 10 billion or above has to be approved by IBN, any firm that wanted to construct the KTM Monorail project would have to approach the IBN for the project development agreement and financial closure.

Since CRCC is now expected to construct the project, the estimated price has risen to Rs 116 billion, which is higher by 36 billion than what was earlier calculated.